Articles in Category: Metal Pricing

This morning in metals news: aluminum prices have surged this week; U.S. nonfarm payroll employment rose by 199,000 in December; and, lastly, electricity prices surged throughout 2021, in large part on the back of rising natural gas prices.

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Aluminum prices surge

aluminum price

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Aluminum prices are on the ascent once again.

The LME three-month aluminum price peaked back in October, reaching as high as $3,200 per metric ton, according to MetalMiner Insights data.

After falling to just over $2,500 per metric ton in early November, aluminum prices traded largely sideways for the next month.

Since mid-December, however, aluminum prices have surged. LME three-month aluminum closed Wednesday at $2,923 per metric ton, its highest in over two months. The price is up 13.05% month over month.

US adds 199K jobs

U.S. nonfarm payroll employment rose by 199,000 in December, the Bureau of Labor Statistics reported.

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A timely post by the Financial Times covers the threat to the global auto industry as a result of the power crisis in China limiting supplies of key components used across a range of industries.

But specific to the post is the making of aluminum alloys. Almost 90% of the world’s magnesium production comes from China, the Financial Times reports. The Chinese government ordered roughly 35 of its 50 magnesium smelters to close until the end of the year due to power shortages.

magnesium periodic table image

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The report quotes Barclays analyst Amos Fletcher, who said: “Thirty-five percent of downstream demand for magnesium is auto sheet — so if magnesium supply stops, the entire auto industry will potentially be forced to stop.”

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Rising aluminum alloy costs

 

The threat is real enough. Unfortunately, as we wrote recently on this issue, flagging up the risk to supply contracts and the potential for cost pass-throughs by aluminum mills, it is not confined to magnesium.

Since our last post, MetalMiner has seen first-hand examples of mills seeking to renegotiate extrusion contracts due to rapidly escalating raw material costs – specifically silicon, manganese and magnesium. All of those rely on high power consumption smelting or refining processes. Furthermore, the world has become dangerously reliant on China for these materials.

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Industrial metals have done rather well in bouncing back from the coronavirus pandemic lockdowns.

Classic fundamentals have been supported by rising sentiment to boost prices across the board. Mine supply has been constrained by governments forcing companies to close mine sites and refineries in a bid to contain the spread of the virus resulting in a hit to raw material and refined metal output in a number of countries.

Do you know the five best practices of sourcing metals, including aluminum?

According to Capital Economics, nickel, tin and zinc have been hit the most, each down 8% to 11% for the first three quarters of 2020 over 2019.

On the other side of the fundamentals, equation demand in top consumer China came roaring back during Q2 and Q3, fueled by infrastructure spending that is seeing positive PMI numbers across all sectors — consumption, retail, construction, manufacturing and exports.

GDP in China has recovered to finish the year above last, and there seems little sign that demand is likely to tail off anytime soon. While the rest of the world’s demand has been initially badly hit by lockdowns, it was maintained for electronics and PPE equipment, both dominated by Chinese manufacturers, which have more than made up for losses in more conventional areas.

Prospects for industrial metals next year

Will this buoyant backdrop persevere into 2021, consumers are asking themselves, should I be factoring in continually rising prices through next year?

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There is a looming crisis in the nickel market.

Some would argue it’s a good problem to have. Demand is set to rise on the back of increasing uptake of electric and hybrid vehicles through this decade. More and more governments will mandate the production of electric vehicles (EVs) over internal combustion engine (ICE) autos. In parts of Europe, there will be outright bans on new ICE vehicles inside 10 years.

However, if nickel supply becomes constrained, consumers are going to pay the price.

Nickel market numbers

It should be said that today the problem barely registers as a price lever.

According to a recent McKinsey report, the stainless steel industry consumers 74% of nickel produced today, dwarfing the 5-8% going into batteries.

But the type of nickel required for battery production is what makes supply so sensitive in the future.

As the report explains, there are two types of nickel. Class 1 predominantly comes from the concentration, smelting and refining of sulfide ores. Meanwhile, Class 2 comes from ores, called saprolites and limonites, with higher iron and other (for batteries) levels of contaminants, such as copper.

So, whereas the stainless steel industry, to a large extent, can use a mix of Class 1 and Class 2, the battery industry draws its raw material from just Class 1, representing a more restricted 46% of the nickel supply market.

Worse, after the all the focus on the cobalt market — with its environmental, social, and corporate governance (ESG) concerns from countries like the Democratic Republic of the Congo — major consumers like Tesla are keen to establish long-term supply arrangements with nickel producers in sustainable locations with more robust ESG standards.

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The Stainless Steel Monthly Metals Index (MMI) declined by three points this month to 67, following a five-point decline last month.

LME nickel prices continued to slide as global markets reacted to production delays due to coronavirus, which weakened demand and prices.

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This morning in metals news, copper prices have been sliding amid growing fears over the spread of the coronavirus in China, laminated steel manufactured by Tata Steel in the Netherlands has been exempted from U.S. tariffs and China’s Jingye is reportedly considering building a new metals recycling furnace in the U.K.

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Copper prices slide

Copper prices dropped for a ninth consecutive session Monday as fears mount over the spread of the coronavirus in China, Reuters reported.

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The Automotive Monthly Metals Index (MMI) fell one point this month for an August reading of 86.

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U.S. Auto Sales

Nissan reported July sales in the U.S. of 98,880 units, down 9.1% on a year-over-year basis.

Honda’s sales ticked up 1.9% to 141,296 units, with its car sales up 1.8% and truck sales up 2.1%.

Toyota Motor North America reported July sales were up 0.2% on a volume basis, but down 3.8% on a daily selling rate basis compared with July 2018.

Meanwhile, earlier this year Fiat Chrysler announced it would shift to quarterly sales reports, following other Detroit automakers General Motors and Ford Motor Company.

Fiat Chrysler did report its second-quarter financial results, reporting adjusted EBIT in North America of €1.57 billion, up €168 million from Q2 2018. Fiat Chrysler’s North American shipments fell 12% due to dealer stock reductions, according to the automaker.

“We continue to deliver strong performance in North America and LATAM. Robust demand for our new products, along with steps we’ve taken to exert discipline across all of our businesses, have generated the momentum to achieve our full-year 2019 guidance,” CEO Mike Manley said in a prepared statement.

General Motors announced Q2 2019 income of $2.4 billion, up 1.6% on a year-over-year basis. In addition, this week GM announced it would open a $65 million parts processing facility in Burton, Michigan, a suburb of Flint. According to GM, the facility will employ more than 800 hourly and salaried workers.

In this month’s J.D. Power and LMC Automotive forecast, July new-vehicle retails sales in the U.S. were expected to fall compared with July 2018. Meanwhile, total sales were forecast to fall 1.8% compared with July 2018.

The seasonally adjusted annualized rate for total sales was forecast to reach 16.7 million units this year, which would come in approximately flat compared with 2017, according to J.D. Power and LMC Automotive.

“July will be another month of modest sales declines—but with high vehicle expenditures—as the average new vehicle sales price exceeds $33,000, up over $1,400 from July 2018,” said Thomas King, senior vice president of J.D. Power’s data and analytics division.

According to J.D. Power, the rise in prices is being driven by “consumers paying more for recently launched SUVs and more attractive interest rates on new vehicles that help keep monthly payments affordable when purchasing more expensive vehicles.”

The Sales Climate in China

Recently, MetalMiner’s Stuart Burns weighed in on the challenges automakers are facing in China, the world’s largest automotive market.

As Burns explained, some foreign automakers are operating at remarkably low percentages of capacity in China.

“The Financial Times reported Ford’s plants in China operated at only 11% of capacity during the first six months of this year, as the firm’s car sales plunged to 27% of the same period last year,” Burns explained.

“Meanwhile, Peugeot owners PSA’s plant in Chang’an produced just 102 cars — yes, you read that right, 102 cars — in the first half of the year, meaning its capacity utilization was below 1%. The firm’s other joint venture with Dongfeng Auto ran at just 22% of capacity, the article reported, as sales were just 62% of the same H1 period last year.”

On the other hand, Japanese automakers and premium European brands have fared well, Burns noted.

“Japanese carmakers, for example, remain strong,” Burns wrote. “Honda and Toyota are both running extra shifts to maintain better than 100% capacity. Premium European brands are doing well, with Daimler’s Beijing Benz joint venture running close to 90% capacity while BMW Brilliance is running at 96%. If it were just the sale of low-end cars that were suffering, you would expect the Japanese carmakers and Volkswagen to also see a similarly sharp downturn, but they are not.”

Actual Metal Prices and Trends

U.S. HDG rose 4.4% month over month to $813/st as of Aug. 1. LME three-month copper fell 0.5% to $5,950/mt.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

U.S. shredded scrap steel fell 6.2% to $257/st. Korean 5052 aluminum coil premium fell 3.7% to $3.15/kg.

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This morning in metals news, U.S. copper deposits are garnering investment from electric vehicle (EV) industry players, London copper rose Friday and the E.U. mulls retaliation if the U.S. imposes tariffs on automobiles.

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Copper Investment

The copper price struggled through the final quarter of 2018, but according to a Reuters report the metal could be getting a boost in demand from the EV sector.

According to the report, U.S. copper deposits have received $1.1 billion in investments from miners looking to fill demand from EV makers.

LME Copper Rises

Sticking with the metal, the London copper price moved up Friday but was set to take a weekly loss, according to Reuters.

The projected 1.6% weekly drop would mark the biggest weekly decline since late December, according to the report.

Back and Forth

Last August, the U.S. Department of Commerce launched a Section 232 probe investigating whether imports of automobiles and automotive parts pose a national security threat.

While the Commerce Department has yet to take action — the first step being the submission of a report and recommendations to President Donald Trump — the E.U. has promised to respond if the U.S. opts to impose tariffs.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

According to a report by Fortune, the E.U. this week said it is prepared to impose $23 billion in tariffs on U.S. goods if the U.S. imposes tariffs on automobiles.

The Commerce Department launched the Section 232 automotive probe May 23, 2018. Pursuant to Section 232 of the Trade Expansion Act of 1962, the secretary of commerce must present the president with a report, including recommendations, within 270 days of the initiation of the probe (making for a late February deadline in this case).

Section 232 produced the Trump administration’s tariffs on imported steel and aluminum (25% and 10%, respectively). Prior to the Trump administration, Section 232 was last invoked under President George W. Bush in a 2001 probe that investigated the impact of imports of iron ore and semi-finished steel.

Even if U.S. steelmakers have been slow to add capacity following President Trump’s tariff protection, it would seem foreign steel makers are willing to commit to domestic U.S. production.

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The Financial Times this week reported on the announcement by BlueScope Steel, Australia’s biggest steelmaker, to examine adding 600,000 to 900,000 metric tons per year of steelmaking capacity to its North Star business in Ohio. This would raise the Ohio plant’s existing production of 2.1 million metric tons per year to some 3 million tons at a cost of between U.S. $500 million and $700 million.

The project would involve the addition of a third electric arc furnace and a second slab caster, according to the Financial Times report. A decision is expected at the company’s February 2019 annual results pending the outcome of the feasibility study, by which time a clearer picture may emerge of what the tariff landscape is going to look like longer term.

Interestingly, Australian steelmakers are exempted from the tariffs; in theory, BlueScope could have invested at home. Australia, however, along with Argentina, are subject to quota limits, so ramping up domestic production to meet U.S. demand is not considered a viable option.

According to the Financial Times, domestic U.S. steel producers are, not surprisingly, doing rather well from the tariffs.

The resulting price rises have fueled a rally in U.S. domestic prices, helping firms like ArcelorMittal surpass forecasts previously set by analysts. Arcelor’s earnings came in at $5.59 billion before interest, taxes, depreciation and amortization for H1 2018. That represented an increase of 28.6% on the same period a year before, as half-year sales rose 17.6% year-on-year in value terms to $39.2 billion, primarily due to higher steel selling prices. Net income was up by almost one-third to $3.06 billion. It hasn’t yet resulted in Arcelor announcing any increased investment in domestic U.S. production capacity — the real aim of the tariffs — but, arguably, steelmakers are waiting to see how the whole tariff situation develops and whether they are truly here to stay (in which case, investment could result).

The U.S. Department of Commerce found foreign steel accounted for about one-third of the 107 million metric tons of steel the U.S. economy used in 2017, the Weekly Standard reported.

Although U.S. producers still have a commanding market share, the report concluded that inexpensive foreign imports were causing domestic steelmakers to lose money, lay off workers, and close plants last year.

U.S. steel plants in 2017 ran at just 72% of capacity, below the 80% level they are widely considered necessary to be profitable. The blame for poor capacity utilization fell firmly at the door of “excessive imports of steel.”

Well, that was last year; this year is something very different.

Following tariffs, steel prices are up sharply, profits are up at the domestic mills and so is capacity utilization. The domestic mills have the option to price balance towards full capacity, shielded as they are now behind a 25% import tariff. They may choose to take higher prices and forego full capacity or adjust pricing to achieve full capacity; we will see what policy has been adopted when Q3 and H2 figures are released.

It is unlikely significant new capacity will be added in the short term, though, despite talk of planned new capacity.

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According to Reuters, steel output in the United States rose 2.9% in the first half to 41.9 million metric tons and gained 0.8% in June to hit 6.9 million tons for the month. Data from the American Iron and Steel Institute (AISI) show capacity utilization at U.S. mills in the year to July was 76.4%, up from 74.4% in 2017, suggesting domestic mills generally are opting for better prices as a route to profitability rather than pricing out tariffed imports.

The Renewables Monthly Metals Index (MMI) dropped three points for an August MMI reading of 105.

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BHP Getting Into Cobalt

Miner BHP Billiton has plans to ramp up its production of a cobalt product used in electric vehicle (EV) batteries, Bloomberg reported.

Per the report, the miner has had success in producing cobalt sulphate alongside its nickel product at its Western Australia operation, according to an interview with Asset President Eduard Haegel.

Questions about cobalt supply and price volatility persist, but a miner of the size of BHP looking to expand its presence in the sphere is an indicator of the metal’s importance and, thus, the level to which the EV market is coveted.

Speaking of Cobalt Prices…

The price of the coveted metal has come off a bit of late, but that might just be a short-term blip.

According to the Toronto-based Sherritt International Corp — a miner with operations in Cuba, Madagascar and Canada — the softening of cobalt prices should reverse as demand continues to pick up, particularly vis-a-vis the growing EV sector, Reuters reported.

Plate Prices

According to a report in the Hellenic Shipping News, shipbuilders in South Korea are asking steelmakers to freeze shipbuilding plate prices.

According to the report, the Korea Offshore & Shipbuilding Association is asking for the freeze because price hikes threaten their survival, as declining orders and increased competition from China have weighed on the Korean shipbuilding sector.

Thick steel plate prices jumped $44/ton in the first half of the year, according to the report.

Actual Metals Prices and Trends

Japanese steel plate fell 1.0% month over month to $715.62/mt. Korean steel plate rose 1.6% to $682.89/mt. Chinese steel plate fell 4.4% to $707.51/mt.

U.S. steel plate jumped 5.2% to $986/st.

Benchmark your current cold rolled coil sheet prices and see how it compares to the market

Chinese neodymium fell 4.0% to $60,182/mt. Chinese silicon fell 2.8% to $1,511.89/mt. Chinese cobalt cathodes fell 2.8% to $97,612.20/mt.

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